On-Line Banking: AT&T-TCI Deal May Put TV Banking in Reach

The future for banking by television may have brightened with AT&T Corp.'s announced agreement last week to acquire Tele-Communications Inc.

AT&T, because of its telephone heritage, has the two-way communications capability that the cable television industry is groping for.

TCI has the high-capacity "pipes" of cable TV, reaching 13.5 million homes in its own right and many more through programming and other alliances.

Bankers have been eyeing two-way cable for years as a potential mass- market channel for delivering remote services. At about 70% penetration, twice as many U.S. homes are wired for cable as have personal computers with modems. And the cable industry, led by TCI, is intent on distributing a new generation of set-top boxes with Internet access.

The technology has come a long way since some failed cable-banking experiments earlier in the decade by Meridian Bank (since absorbed into First Union Corp.), National Westminster Bank and Shawmut Bank (now Fleet Financial Group), and Barnett Banks (now owned by NationsBank Corp.).

Andy Sernovitz, president of the Association for Interactive Media in Washington, which includes 12 banks in its 300 members, said the advent of the Internet took some of the steam out of early interactive TV experiments.

"The Internet came so fast and so suddenly that everyone was surprised by its scope," Mr. Sernovitz said. With advances in security and software, "many obstacles to interactive banking have been removed. To put it (banking) on the TV instead of the Internet is only a matter of construction."

He said the AT&T-TCI combination would "bring more resources to the table to build in high-end functionality. We're a lot further along than anyone had expected."

AT&T's interest in cable should give banks a greater appreciation for their role in interactive television, said Catherine Corby, who oversaw Barnett Banks' early experimentation and has been a strong advocate of the medium. Now director of retail strategy at Earnings Performance Group of Short Hills, N.J., she said, "The investment is too massive for banks to think that they'll be leaders."

"The telcos will lead the way with the infrastructure into homes," Ms. Corby added, and banks can focus on being content providers that profit through strong brand identities and relationships with customers.

Edward D. Horowitz, executive vice president of advanced development at Citicorp and a former executive of the media conglomerate Viacom Inc., reserved judgment on how banks will fare until the deal plays out. He noted that AT&T has always worked in an "open world" where anyone can connect to anyone. Cable operators, by contrast, "are fundamentally gatekeepers. They determine what their customers see.

"It is our hope that this transaction will result in an open world," Mr. Horowitz said. He added that some banks may be able to secure positions as preferred providers of financial services on the cable television provider's "front screen."

According to one estimate, AT&T would spend five years and $9 billion to upgrade TCI's network. Within five years of completing the deal, AT&T hopes to sell access to the Internet to 30% of TCI's cable customers.

AT&T sees it as a worthy and competitive investment because cable companies and regional telephone companies-the group consisting of the so- called Baby Bells-own the only direct communications links into homes and businesses.

TCI also happens to be involved in a joint venture with BankAmerica Corp., Intuit Inc., and Home Network, which attracted new attention to cable as a potential financial channel when it was announced in March. BankAmerica is the lead shareholder and said it expects to keep the system open to other financial institutions.

Consumers would be able to check account balances and transfer funds between accounts; electronically receive, review, and pay bills; manage investments; shop and apply for mortgages, other loans, and insurance; and prepare and file taxes. Services are expected to be available in 1999.

Michael de Vico, executive vice president at BankAmerica's interactive banking division, said the joint venture "has not been affected" by its merger deal with NationsBank nor AT&T's with TCI.

"Television, in terms of a customer device, is a natural," said Mr. de Vico. "With the growth rates in Internet usage, now is the time to invest in this delivery channel. Our goal is to be a primary provider of financial services over interactive TV."

Distributing electronic services via a cable network has distinct advantages, he said. Most notably, the bigger bandwidth allows faster transmissions at higher volumes than competing technologies. "Cable can be hooked into other Internet-enabled devices, so it is broader than just TV," Mr. de Vico said.

For its $48 billion, AT&T would be purchasing most of TCI's cable and digital assets, including its 42% stake in Home, whose interactive technology reaches 100,000 customers. TCI would rank second to Time Warner Cable in subscribing homes.

AT&T spokesman Mark Siegel said it was "too soon to tell" what plans AT&T has for interactive banking.

"We don't know enough to say what specific offers we'll have," Mr. Siegel said. "But the idea is to give people maximum choice and flexibility in all the communications choices they get." For example, "if someone wants high-speed Internet access all day over the TV, we'll make it available."